While the reaction to the plea has been varied, a general theme is that Cohen’s plea almost assuredly demonstrates Trump’s guilt. We think there are several unresolved factual and legal issues which, until they are settled, preclude any firm conclusion of liability.

By Samuel Estreicher and David Moosmann|September 25, 2018 at 03:21 PM

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Michael Cohen. Photo: Seth Wenig/AP

After Michael Cohen pled guilty to eight federal offenses—two of which were campaign finance violations—commentators began to speculate about President Donald Trump’s exposure to criminal and civil liability for those same offenses. While the reaction to the plea has been varied, a general theme is that Cohen’s plea almost assuredly demonstrates Trump’s guilt. We think there are several unresolved factual and legal issues which, until they are settled, preclude any firm conclusion of liability. Here, our focus is not on the payment to Karen McDougal. That payment involves a possible violation of 52 U.S.C. §30118(a), which makes it “unlawful for … any corporation … to make a contribution or expenditure” in connection with a Presidential campaign. If, as alleged, the payment was made by a media company in coordination with the Trump campaign, the payment constituted an unlawful in-kind contribution by a corporation.

The issues concerning Cohen’s payment of $130,000 to adult film actress Stormy Daniels are trickier. Upon learning that Daniels intended to sell her story describing a sexual encounter with the president, Cohen arranged to purchase the publication rights and paid Ms. Daniels $130,000 in exchange for the rights and her agreeing to a nondisclosure agreement. After the payment to Daniels, Cohen submitted requests for repayment to the Trump Organization, the president’s conglomerate of over 500 business entities. Listing the payment to Daniels along with some other expenses, Cohen asked for approximately $180,000 in compensation; the Trump Organization paid Cohen approximately $400,000 over the course of the next 12 months. The government alleged that, in making the payment to Daniels, Cohen made a contribution to the Trump campaign far in excess of the $2,000 cap imposed by 52 U.S.C. §30116(a)(1)(a). In charging Cohen criminally, the government alleged, and Cohen pled, that he “willfully and knowingly” violated the law. 52 U.S.C. 30109(d)(1)(A).

A few initial words on the basic framework of federal campaign finance law. Campaign finance law recognizes two primary means by which elections are influenced: expenditures and contributions. Expenditures and contributions alike include “purchase[s], payment[s], distribution[s], loan[s] … advance[s], deposit[s], or gift[s] of money or anything of value, made by any person for the purpose of influencing any election for Federal office.” 11 CFR 100 pts. B and D. Because most election-related activities could fall into either category, the law differentiates between the two by examining the connection between the activity and the candidate or campaign that is benefitted. Benefits received directly by, or in coordination with, a campaign are called contributions. Contributions, in all likelihood because of their greater risk of corruption, are subject to strict caps and reporting requirements, the only exception being where a candidate himself expends personal funds; “candidates for Federal office may make unlimited expenditures from personal funds” subject to limited exceptions which are inapplicable here. 11 CFR 110.10. Unlike contributions, expenditures are made either wholly independently of a campaign or by a campaign itself. While candidates must report their own expenditures (11 CFR 104.3(a)(3)(ii)), they are under no obligation to report the many independent expenditures which are made by those advocating for their election.

Given this framework, the first question is whether the payment to McDougal was made “for the purpose of influencing” the election. While Cohen has expressly pled that he had the requisite intent, whether the President’s intent can be established beyond a reasonable doubt is less clear, especially where there is at least a plausible alternative intent—to prevent personally embarrassing information from arising which might affect his marriage. This is a potential dual-motive situation and at least a fact question which cannot be resolved without extensive inquiry into what the President’s motivations were at the time of the Daniels payment. It should be clear that Cohen’s plea, obtained under pressure and with the ultimate aim of developing a case against the president, cannot in and of itself establish whether Trump had the requisite mental state.

The second question is whether the Daniels payment constitutes a contribution at all. Most in-kind contributions involve another party rendering a benefit to the candidate or his committee; the candidate’s receipt of a gift now suggests an intent to repay later. Cohen’s services look far different from the sorts of activities the law recognizes as contributions. Lawyers for the rich and powerful are often in the business of obtaining discreet resolutions of issues that threaten the image and interests of their clients by securing the silence of those with controversial or damaging claims or other information. Cohen’s services, like those of other lawyers, came at a steep price: In exchange for the discrete payment of $130,000 to Ms. Daniels, Cohen received nearly $400,000. Far from being a gratuitous gift to the campaign, Mr. Cohen provided legal services and charged accordingly. Having then been paid by President Trump, it is difficult to see how the provision of that service could constitute a “contribution” within the meaning of the campaign finance regulations.

Section 30101(8)(B)(viii) provides that the “the term ‘contribution’ does not include” payments for “any legal or accounting service” paid to a political committee if “the person paying for such services is the regular employer of the person paying for such service … .” From a functional though not technically legal standpoint, Trump may have been Cohen’s “regular employer.” The exclusion would not apply, however, unless “such services are not attributable to activities that directly further the election” of the candidate. “[D]irectly futher[ing]” the candidate’s election is arguably a tighter standard than the broader “purpose of influencing” the election standard in the definition of the term “contribution” and this standard may not reach dual-motive situations.

If Cohen’s payment was in fact a loan to the Trump campaign, regulations of the Federal Election Commission (FEC) suggest that Cohen’s loan will not to be treated as contributions. First, the FEC has stated that, where “credit is extended in the ordinary course of the person’s business [on] terms … substantially similar to extensions of credit to nonpolitical debtors that are of similar risk and size of obligation,” the extension of such credit is not a contribution. 11 CFR 100.55. Similarly, another regulation provides that “[a]ny loan of money derived from an advance on … a line of credit available to the candidate” is not a contribution so long as the loan is made lawfully and “under commercially reasonable terms” by a person who makes such advances in the “normal course of [that] person’s business.” 11 CFR 100.83. While little to no case law exists construing these regulations, these provisions recognize that the extension of credit or the fronting of expenses is a common commercial activity which, when conducted according to the terms ordinarily prevailing in commercial practice, are far removed from the kinds of gifts and gratuities that campaign finance law is designed to regulate. While the ends to which Cohen directed his services may be unusual, the practice of fronting client expenses is not uncommon among lawyers, especially where long-standing retainer and other agreements provide for client funds to be used by the lawyer to further the goals of the representation. While we know little of the day-to-day workings of Cohen’s practice, the long-standing attorney-client relationship between Cohen and Trump likely included payment mechanisms like the one deployed in the Daniels case such that he would regularly provide such services in the course of his business with the President. If that is so, Cohen’s conduct would likely fall into one of the exceptions above and thus not constitute a contribution for purposes of the campaign finance law.

If the payment to Daniels was not a contribution, Cohen could not have incurred any liability by having made it. Consequently, the President could not be held liable as a co-conspirator. The only liability that the President could be subject to, then, is for failing to properly disclose his own expenditures. While a prosecution for that conduct theoretically could come in the form of a charge for making false statements to government officials, the most likely penalties would arise under the campaign finance laws themselves. Applicable law provides that a candidate’s principal campaign committee must “report the total amount of receipts received”—including loans, debts, and contributions. 11 CFR 104.3. Irrespective of whether Cohen’s payment to Daniels constituted a contribution, the campaign committee should have reported whether and the extent to which it was indebted by the arrangement between the president and Cohen; additionally, under the same reporting provision, the campaign would have been obliged to report when the president transferred money to Cohen in satisfaction of the debt.

While demonstrating a campaign finance violation is not impossible, criminal liability will require demonstrating that the president—and any high-level officials implicated—acted “willfully and knowingly”—that they knew of their obligations under the law yet nevertheless disobeyed them. While proof of such intent is not impossible—and is facilitated by the ever-changing series of justifications and explanations the Trump legal team has given for the President’s conduct—it is difficult enough to warrant caution before assuming that the President’s guilt is a given.

Samuel Estreicher is the Dwight D. Opperman Professor and co-director of the Institute of Judicial Administration at New York University School of Law. David Moosmann is a research assistant and third-year student at New York University School of Law.

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